SEC Charges Global Asset Partners and Joseph C. Lavin For Defrauding Investors In $5 Million Ponzi Scheme
Another Ponzi scam, this time out of Seattle, Washington.
The Securities and Exchange Commission today filed fraud charges against Joseph C. Lavin and his company, Global Asset Partners, LLC ("GAP"), a purported Seattle-based investment fund manager, accusing them of misappropriating at least $5 million from over 100 investors nationwide. According to the Commission, Lavin, 41, of Woodinville, Wash., promised investors extraordinary returns of 18 to 36 percent per year from the GAP investments. Far from producing the promised returns, the Commission's complaint alleges that Lavin used investor funds to pay for personal expenses for himself and his friends, including lavish trips, automobiles, a Seattle Mariners luxury skybox, and real estate in Costa Rica. Lavin also diverted investor funds to a now-bankrupt Texas real estate project known as Wildflower Resort Company.The complaint alleges that Lavin told investors that their money would be placed into funds managed by GAP, where it would be invested in foreign currencies and asset-backed securities. Instead, Lavin converted the investors' money to his own use. In addition, as in a classic Ponzi scheme, Lavin used money raised from new investors to pay purported returns to previous investors. The Commission further claims that Lavin sent false account statements to GAP's investors showing ever-increasing account balances based upon accumulation of the promised returns. In reality, according to the complaint, the GAP funds never made any money and Lavin fabricated the account balances on the statements to fool investors into believing their investments were profitable and to induce them to make additional investments.
According to the complaint, "Lavin lured investors with a claim that he had a proven track record and that GAP was an established company doing business worldwide. In fact, Lavin's only prior currency trading experience consisted of investments in an earlier failed currency trading scam. GAP, which Lavin formed in 2001, was far from a world-wide organization; besides Lavin, it had only a handful of employees, all located in the State of Washington."
Further, "To conceal their misappropriation and misuse of investor funds and to induce additional investments, Lavin and GAP sent false monthly and annual account statements to GAP's investors. Each investor's account statements showed ever-increasing balances based upon the supposed accumulation of the promised returns. The account statements were fiction. In reality, the GAP funds never made any money and the returns shown on account statements as paid from investment proceeds were actually funded by money from new investors. GAP's accounts did not have sufficient cash, securities or other liquid assets to cover the balances shown on the statements."
When investors read these alleged facts in the cold hard light, that clear blue sunshine which pierces all fog, they will be ashamed that they could fall for such lies -which is an excellent reason not to report the facts this way.
My own view is that this type of press release accomplishes little -it doesn't protect future investors in this type of Ponzi because it fails to explain how the con criminal was able to convince people of his track record, his large organization, and how the false reporting worked.
It would be better to say simply "The Commission's complaint, filed in federal district court in Seattle, seeks to enjoin Lavin and GAP from future violations of the antifraud provisions of the federal securities laws Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act. The Complaint also requests that the district court order Lavin and GAP to disgorge their ill-gotten gains, plus prejudgment interest and to impose a civil monetary penalty."
This makes it sounds mysterious enough that no normal person would be ashamed not knowing how to spot a violation of a "Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act."
